Saroj & Ors v. Axis E Corp Solutions Pvt Ltd & Ors

JUDGEMENT

JYOTI SINGH, J. (ORAL)

¶1These petitions are filed on behalf of the Petitioners under Section 11(6) of Arbitration and Conciliation Act, 1996 ('1996 Act') seeking

2 of

appointment of an independent Arbitrator to adjudicate the disputes between the parties.

¶2Disputes in the present petitions emanate out of a Joint Venture Agreement dated 20.06.2022 executed between the parties. Petitioners allege that Respondents failed to fulfil their obligations under the Agreement and committed a breach, while Respondents contend otherwise. Since there were outstanding payments towards the Petitioners on account of security deposit etc., Petitioners sent invocation notices dated 01.07.2024 and 29.06.2024 respectively, in the two petitions to the Respondents calling upon them to agree to appointment of an Arbitrator by mutual consent. However, there was no response and after passage of 30 days from the dates of receipt of the notices, Petitioners filed the present petitions.

¶3Leaned counsel for the Respondents does not dispute the existence of arbitration agreement, however, opposes the appointment of the Arbitrator on the ground that Respondents No. 2 to 4 are non-signatories to the arbitration agreement and hence cannot be made parties to the arbitral proceedings.

¶4Learned counsel for the Petitioners, on the other hand, refutes this submission and submits that Respondents No. 2 to 4 are necessary parties and even otherwise, the question whether they are necessary or proper parties in arbitration or not is to be decided by the Arbitrator and in this context, reliance is placed on the judgments of the Supreme Court in Cox and Kings Limited v. SAP India Private Limited and Another, (2024) 4 SC 1; ASF Buildtech Private Limited v. Shaporji Palonji and Company Private Limited, 2025 SC OnLine SC 1016; and Adavya Projects Pvt. Ltd. v. Vishal Structurals Pvt. Ltd. and Others, 2025 SC OnLine SC 806.

3 of

¶5In my view, there is no merit in the contention of the Respondents. The exercise of adjudicating the existence of arbitration agreement qua a non-signatory party is to be left to the Arbitral Tribunal and cannot be considered in these petitions. It is no longer res integra that a referral Court under Section 11 of 1996 Act only undertakes a limited enquiry into the existence of the Arbitration Agreement. The question whether the referral Court can enter into the exercise of determining whether a non-signatory is bound by the Arbitration Agreement need not detain this Court as law on this is now fairly well settled by the Supreme Court.

¶6Recently, the Supreme Court in ASF Buildtech (supra) , referring to and relying on an earlier judgment of the Supreme Court in Cox and Kings

(supra) , held that from the said decision it is discernible that the entire exercise of determining whether a non-signatory is bound by an Arbitration Agreement, in contradistinction to the narrow question of the existence of the Arbitration Agreement, necessitates a far more expansive enquiry. It was observed that this enquiry transcends the limited question of mere existence as it entails an interpretation of the scope and contours of the principal agreement, an assessment of the commercial understanding between the parties, examination of the nature and purpose underlying the principal contract and the character of the transactions and conduct of the parties vis-à-vis, the object and wisdom of the parties underlying contractual agreement. Such an exercise mandates a detailed and comparative evaluation of the substantive provisions of the main agreement and not merely of the Arbitration Agreement or Clause, in isolation.

¶7It was further held that by no stretch of imagination can the issue whether non-signatory is bound by the arbitration agreement be

4 of

characterised as one that is either significant or sine qua non to the determination of the existence of the Arbitration Agreement. The former necessitates a substantive examination of the entire contractual relationships, whereas the latter is a limited exercise directed only at confirming the formal validity of the Arbitration Agreement itself. Such a question is not one of 'existence' of the Arbitration Agreement, but one of interpretation and scope of the principal agreement. The Supreme Court observed that once the referral Court identifies an Arbitration Agreement that satisfies the formal requirements of Section 7 of 1996 Act, the existence of the Arbitration Agreement is established, even though its binding nature qua the non-signatory may not be established. The question whether a non-signatory is bound by the Arbitration Agreement involves a more nuanced determination of parties' intentions etc., and the broader context of the Agreement and as held in Cox and Kings (supra) 'existence of Arbitration Agreement' and 'veritable party to the Arbitration Agreement' are two separate and independent enquiries. It was further observed that even if it is assumed that the referral Court in its jurisdiction under Section 11 of 1996 Act has the discretion to determine whether a non-signatory is a veritable party to the Arbitration Agreement or not, by virtue of Cox and Kings (supra) , the referral Court should not only refrain but rather loathe the exercise of such discretion and this exercise should be left to the Arbitral Tribunal, which can delve into factual and circumstantial evidence along with the legal aspects to decide this issue. The Supreme Court emphasised on a hands off approach of referral Court on this issue underscoring that once the Arbitral Tribunal stands constituted, it becomes automatically open to all parties to raise any preliminary objection, including one touching on

5 of

the impleadment of a non-signatory party and/or whether the non-signatory party qualifies as a veritable party to the arbitration agreement.

¶8It was further held by the Supreme Court that the Arbitral Tribunal would be the appropriate forum for deciding this issue and this approach is necessitated by the inherent complexity involved in deciding this question, determination of which hinges upon a multiplicity of factual aspects and demands a high threshold of satisfaction based on a cumulative and holistic evaluation of the entire factual matrix. Such an intricate and evidence driven exercise makes the Arbitral Tribunal the most appropriate forum to adjudicate, as it possesses the institutional advantage of conducting a comprehensive scrutiny of all evidences and materials adduced by the parties. Significantly, the Supreme Court also highlighted the legislative intent underlying Section 11 of 1996 Act, more particularly sub-Section (6-A), which is expeditious disposal of applications for appointment of Arbitrators and held that this legislative objective militates against the referral Courts undertaking any elaborate or detailed factual enquiry, which would inevitably delay proceedings and therefore, prudence dictates that referral Courts confine themselves to a prima facie examination of the existence of the Arbitration Agreement and leave substantive determinations such as binding nature of non-signatories to the Arbitral Tribunal.

¶9The Supreme Court also underscored an additional and equally compelling consideration in taking this approach. It was observed that power exercised by referral Courts under Section 11 of 1996 Act is judicial in nature. Any premature adjudication or opinion by the referral Court would not only usurp the Arbitral Tribunal's role as the forum of first instance for

6 of

dispute resolution but could also cause irremediable prejudice, especially where the referral Court were to refuse impleadment of a non-signatory, there would be no statutory right of appeal to challenge such a refusal, whereas a determination by the Arbitral Tribunal on this aspect under Section 16 of 1996 Act will be amenable to challenge under Section 37 of 1996 Act. Relevant paragraphs from the judgment in ASF Buildtech (supra)

are as follows:- "74. From above, it is manifest that the test for determining the applicability of the 'Group of Compa in nature, necesitating a close and context - specific inquiry. However, Cox and Kings (I) (supra) did not merely stop at just establishing the factual nature of such an exercise, but further proceded to expound, the extent and depth in which the aforementioned factual factors must be determined in the course of such exercise by laying down the threshold standards for determining the aplicability of the said doctrine. Placing reliance on one another decision of this Court in Oil and Natural Gas Corporation Ltd. v. Discovery Enterprises Pvt. Ltd.,

(202) 8 SC 42, it held that the test for determining applicability o envisages a cumulative and holistic determination of the factual aspects such as the relationship betwen and among the legal entities within the corporate group structure, their underlying contractual obligations, the comonality of the subject mater and the composite nature of the transactions undertaken, and their overal participation in the project/subject - mater for achieving a comon purpose. The relevant observations read as under: — "110. In Discovery Enterprises (supra), this Court refined and clarified the cumulative factors that the courts and tribunals should consider in deciding whether a company within a group of companies is bound by the arbitration agrement:

"40. In deciding whether a company within a group of companies which is not a signatory to arbitration agrement would nonetheles be bound by it, the law considers the folowing factors:

(i) The mutual intent of the parties;

(i) The relationship of a non - signatory to a party which is a signatory to the agrement;

(i) The comonality of the subject - mater;

(iv) The composite nature of the transactions; and

7 of

(v) The performance of the contract."

x

x

x

¶76Owing to the intrinsic character of the test — being one that entails a fact - intensive inquiry involving a mixed question of fact and law — and further, given the extensive standard it demands, requiring a comprehensive and holistic apraisal of al material facts and atendant circumstances, it may be safely concluded that the arbitral tribunal is the more apropriate and competent forum to adjudicate upon the isue of whether a non - signatory is bound by the arbitration agrement, as the arbitral as it has the inate advantage of going through al the relevant evidence and pleadings in greater depth and detail than the referal court at the pre - reference stage, and as such is uniquely positioned to undertake such a nuanced determination.

II. Determining the —existence" viz - à - viz the intention of parties from —express words" of an Arbitration Ag

¶7In order to resolve the question whether the isue of a non - signatory being bound by an arbitration agrement could be said to be inextricably intertwined with the determination o agrement, it is aposite to once again advert to Cox and Kings

(I) (supra), more particularly, as to the maner in which it envisages the identification and determination of the binding efect of an arbitration agrement upon a non - signatory, based on the factual aspects delineated by it, as mentioned in the foregoing paragraphs.

¶78Cox and Kings (I) (supra) observed that the non - signatory to a party which is a si analyzed in the context of the underlying substantive contract which contains the arbitration agrement. This may be ascertained either from the duty or relationship atributed to the non - signatory within the underlying contract or may be infered from its conduct with respect to such contract. If the underlying contract forms basis for a subject - mater comon to both the signatory and the non - signatory or any composite transaction by them, then it would be a positive indicum for infering the consent of the non - signatory to arbitrate with respect to the subject - mater. Transactions by a non - signatory which are interlinked with the underlying contract in such maner, in the absence of which the performance of the contract may not be feasible, is one another instance for infering this consent. Placing reliance on Chloro Controls (supra) it observed that factors such as "comm - matter" or "composite transaction" would have reading of the principal and suplementary agrements on the one hand, and the intention of the parties and their conduct on the other. Amongst these, the participation of the non - signatory in the performance of the underlying contract is the most crucial factor to discern the intention of

8 of

the parties.

"112. Section 7 of the Arbitration Act broadly talks about an agrement by the parties in respect of a defined legal relationship, whether contractual or not. Such a legal relationship must give rise to legal obligations and duties. In a corporate group, a company may have various related companies. The legal relationship must be analysed in the context of the underlying contract containing the arbitration agrement. The nature of the contractual relationship can either be formaly encrusted in the underlying contract, or it can also be infered from the conduct of the signatory and non - signatory parties with respect to such contract. […]

¶15In case of multiple parties, the necesity of a comon subject - mater and composite transaction is an important factual indicator. An arbitration agrement arises out of a defined legal relationship betwen the parties with respect to a particular subject mater. Comonality of the subject mater indicates that the conduct of the non - signatory party must be related to the subject mater of the arbitration agrement. For instance, if the subject mater of the contract underlying the arbitration agrement pertains to distribution of healthcare gods, the conduct of the non - signatory party should also be conected or in pursuance of the contractual duties and obligations, that is, pertaining to the distribution of healthcare gods. The determination of this factor is important to demonstrate that the non - signatory party consented to arbitrate with respect to the particular subject mater.

¶16In case of a composite transaction involving multiple agrements, it would be incumbent for the courts and tribunals to ases whether the agrements are consequential or in the nature of a folow - up to the principal agrement. This Court in Canara Bank (supra) observed that a composite transaction refers to a situation where the transaction is interlinked in nature or where the performance of the principal agrement may not be feasible without the aid, execution, and performance of the suplementary or ancilary agrements.

¶17The general position of law is that parties wil be refered to arbitration under the principal agrement if there is a situation where there are disputes and differences agreement and also disputes "conne - mater of the principal agrement In Chloro Controls (supra), this Court clarified that the principle of "composit be gathered from the conjoint reading of the principal and suplementary agrements on the one hand, and the explicit intention of the parties and atendant circumstances on the other. The comon

9 of

participation in the comercial project by the signatory and non signatory parties for the purposes of achieving a comon purpose could be an indicator of the fact that al the parties intended the non - signatory party to be bound by the arbitration agrement. […]"

¶18The participation of the non - signatory in the performance of the underlying contract is the most important factor to be considered by the courts and tribunals. The conduct of the non - signatory parties is an indicator of the intention of the non - signatory to be bound by the arbitration agrement. The intention of the parties to be bound by an arbitration agrement can be gauged from the circumstances that suround the participation of the non signatory party in the negotiation, performance, and termination of the underlying contract containing such agrement. The UNIDROIT Principle of International Comercial Contract, 201698 provides that the subjective intention of the parties could be ascertained by having regard to the folowing circumstances:

(a) preliminary negotiations betwen the parties;

(b) practices which the parties have established betwen themselves;

(c) the conduct of the parties subsequent to the conclusion of the contract;

(d) the nature and purpose of the contract;

(e) the meaning comonly given to terms and expresions in the trade concerned; and

(f) usages.

(Emphasis suplied)

¶79What can be discerned from the above is that, the entire exercise of determining whether a non - signatory is bound by an arbitration agreement, in contradistinction to t of the arbitration agrement, necesitates a far more expansive inquiry. This inquiry transcends the limited entails an interpretation of the scope and contours of the principal agrement, an asesment of the comercial understanding betwen the parties, examination of the nature and purpose underlying the principal contract, and the character of the transactions and conduct of the parties viz - à - viz the object and wisdom of the parties underlying contractual arangement. Such an exercise mandates a detailed and comparative evaluation of the substantive provisions of both the principal and suplementary agrements, and not merely of the arbitration agrement or clause in isolation.

¶80The determination of the "existence

of

contrast, is confined to examining the formal validity of the arbitration agrement or the arbitration clause itself, where only the arbitration agrement or clause, as the case may be has to be loked into. It does not require delving into the broader legal relationships emerging from the underlying contractual framework. Cox and Kings (I) (supra) specificaly mandates a holistic apraisal of the principal and suplementary agrements in tandem with the parties' intention and conduct, thereby demanding an inquiry far more extensive than that required for the mere establishment of the existence of the arbitration agrement.

¶81Thus, by no stretch of imagination can the isue of whether a non - signatory is bound by the arbitration agrement be characterized as one that is either significant or sine qua non to the determination of the arbitration agreement's "existence". examination of the entire contractual relationship, whereas the later is a limited exercise directed only at confirming the formal validity of the arbitration agreement itself. Such a the arbitration agrement, but one of interpretation and scope of the principle agrement.

x

x

x

¶84From the above exposition of law, it can be sen that this Court in Cox and Kings (I) (supra) recognized that there exists a fine but pertinent distinction between determining the agreement and determining the intent words" used in the arbitration agree whether a non - signatory is bound by the arbitration agrement or not. The former only deals with determining whether an arbitration agrement exists and is present in the record of agrement or the writen materials as delineated under Section 7 sub - section (4)(b) of the Act, 196. The later, in contrast, involves construction words" that has been used in such circumstances such as nature and object of the contract and the conduct of the parties during the formation, performance, and discharge of the contract, and how the arbitration agrement fits within the broader contractual framework.

¶85Once the referal court, identifies an arbitration agrement that satisfies the formal requirements of Section 7 of the Act, 196, either from the record of agrement or the writen materials under sub - section (4), the "existence" of the arbitration agree even though, its binding nature qua the non - signatory may not be established, as it is entirely posible for a referal court to arive at finding that prima - facie there exists an arbitration agrement in terms of Section 7 of the Act, 196 without resolving the question of whether a non - signatory is bound by such arbitration agrement or not, as it depends on

of

aditional factors beyond mere existence.

¶86Once, the "existence" of the arbit ben established, the condition stipulated in terms of Section 1 sub - section (6A) of the Act, 196, is said to have ben fulfiled, and the referal courts have no option but to refer the dispute to arbitration, notwithstanding whether the intention of a non - signatory as a veritable partly to such agrement is established or not. Apart from the pre - condition of examining the "existen Section 1 of the Act, 196 does not either contemplate or require determination of the "defined legal nor does it mandate an asesment of the futuro intention of the parties, whether signatories or non - signatories, from the "ex arbitration agrement. This limited inquiry does not extend to the substantive legal consequences or implications of such arbitration agrement. The question of whether a non - signatory is bound by the arbitration agrement is entirely separate from the question of its "existence." The latter is a relat determination based on the formal presence of the agrement, whereas the former involves a substantive and contextual inquiry into the mutual intent of the parties, which may be examined by the arbitral tribunal.

¶87What folows from this is that, the question whether a non - signatory is bound by the arbitration agrement is completely independent of the question concerning the "existence" inquiries — while related — are distinct in nature and function. The "existence" of an arbitration agree presence in the contractual documentation, as per the requirements under the Act, 196 and once established, it obligates the referal of the dispute to arbitration. By contrast, the question of whether a non - signatory is bound by the arbitration agrement involves a more nuanced determination of the parties' intentions, contractual relationships, and the broader context of the agrement, which is not confined to the formal text of the arbitration clause alone.

¶8Thus, even in the absence of the non - signatory being made a party to the procedings before the referal court, and where the question of its impleadment has neither ben raised nor adresed or left open to the arbitral tribunal by the referal court, the arbitral tribunal would be ful empowered to examine this isue in the first instance and determine whether any non - signatory is bound by the arbitration agrement based on the factual circumstances of the case, and if necesary, implead such non - signatory to the arbitration procedings.

x

x

x

¶90This is further fortified from the fact that, Cox and Kings (I) (supra) in its subsequent paragraphs, more particularly paragraph no. 164, while

of

discusing the scope of Section 1 of the Act, 196, distinctively refers to and treats the criterion of "existe "veritable party to the arbitration independent inquiries, thereby underscoring that the determination of the existence of an arbitration agrement stands apart from the asesment of whether a non - signatory can be bound to it.

x

x

x

¶92Thus, what has ben conveyed in so many words by Ajay Madhusudan Patel (supra) is that the inquiry into whether a non - signatory is bound by an arbitration agrement is not, in its esence, an inquiry into the formal or juridical existence of the arbitration agrement itself. It is an exercise of determining the functional concept of consent within the existing arbitration agrement rather than the existence of the arbitration agrement itself. It is to cul out and discern the intention of various parties — whether signatories or otherwise — in relation to their wilingnes to be bound by the arbitration mechanism embeded in the contract.

¶93Put diferently, although notionaly the exercise of determining 'existence of the arbitration agreem - signatory', ma the surface apear to be concerned with the arbitration agrement or clause in question, yet one must be mindful that the actual focus of such exercise lies in determining the existence of consent of the parties through fact paterns to such arbitration agrement or clause and not vice - versa. It is the existence of mutual consent to arbitrate — not the formal existence of the arbitration agrement — that is the heart of this inquiry.

¶94There runs no umbilical cord betwen the exercise of determining the "existence of the arbitration agreem qua the non - signatory". The latter is an determination that fals outside the narow and circumscribed domain of the referal court's singular obligation under Section 1 sub - section (6A) of the Act, 196 and as such canot be conflated to be one pertaining to or attacking the "existence" of an arbi

¶95Even if it is asumed for a moment that the referal court in its jurisdiction under Section 1 of the Act, 196 has the discretion to determine whether a non - signatory is a veritable party to the arbitration agrement or not, by virtue of Cox and Kings (I) (supra), the referal court should only refrain but rather loathe the exercise of such discretion. Any discretion which is confered upon any authority, be it referal courts must be exercised reasonably and in a fair maner. Fairnes in this context does not just extend to a non - signatory's rights and its aprehension of prejudice, fairnes also demands that the arbitration procedings is given due time to gestate so that the entire dispute is holisticaly decided. Any determination even if prima - facie by a referal court on such aspects

of

would entail an inherent risk of frustrating the very purpose of resolution of dispute, if the referal courts opine that a non - signatory in question is not a veritable party. On the other hand, the aprehensions of prejudice can be properly mitigated by leaving such question for the arbitral tribunal to decide, as such party can always take recourse to Section 16 of the Act, 196 and thereafter in apeal under Section 37, and where it is found that such party was put through the rigmarole of arbitration procedings vexatiously, both the tribunal and the courts, as the case may be, should not only require that al costs of arbitration insofar as such non - signatory is concerned be borne by the party who vexatiously impleaded it, but the arbitral tribunal would be wel within its powers to also impose costs.

I. Decision of Cox and Kings (I) and Ajay Madhusudan and the scope of Section 1 of the Act, 196 for joinder of non - signatories to arbitration procedings.

¶96The aforesaid may be loked at from one another angle. This Court in Cox and Kings (I) (supra) also discused the role and scope of jurisdiction of the referal courts and arbitral tribunals under Section(s) 1 and 16 of the Act, 196, particularly in the context of binding a non - signatory to the arbitration agrement. It reiterated that under Section 1, the referal court only has to determine the prima - facie existence of an arbitration agrement. Whereas, the isue of determining parties to an arbitration agreement is quite disti agrement, as such isue goes to the very rot of the jurisdiction competence of the arbitral tribunal, and thus, empowered to decide the same under Section 16. Placing reliance on the decision of this Court in Shin - Etsu Chemical Co Ltd. v. Aksh Optifibre Ltd. reported in,

(205) 7 SC 234, it held that the referal court should not unecesarily interfere with arbitration procedings, and rather alow the arbitral tribunal to exercise its primary jurisdiction for deciding such isues. The relevant observations read as under: — "157. When deciding the referral i both Sections 8 and 1 is limited. Where Section 8 requires the referal court to lok into the prima facie existence of a valid arbitration agrement, Section 1 confines the court's jurisdiction to the existence of the examination of an arbitration agrement.

¶158Section 16 of the Arbitration Act enshrines the principle of competence competence in Indian arbitration law. The provision empowers the arbitral tribunal to rule on its own jurisdiction, including any ruling on any objections with respect to the existence or validity of arbitration agrement. Section 16 is an inclusive provision which comprehends al preliminary isues touching upon the jurisdiction of the arbitral tribunal. The doctrine of competence

of

competence is intended to minimize judicial intervention at the threshold stage. The isue of determining parties to an arbitration agrement goes to the very rot of the jurisdictional competence of the arbitral tribunal.

¶161The above position of law leads us to the inevitable conclusion that at the referal stage, the court only has to determine the prima facie existence of an arbitration agrement. If the referal court canot decide the isue, it should leave it to be decided by the arbitration tribunal. unecesarily interfere with arbitration procedings, and rather alow the arbitral tribunal to exercise its primary jurisdiction. In Shin - Etsu Chemical Co. Ltd. v. Aksh Optifibre Ltd.125, this Court observed that there are distinct advantages to leaving the final determination on maters pertaining to the validity of an arbitration agrement to the tribunal […]"

(Emphasis suplied)

¶97Cox and Kings (I) (supra) further observed that in case of joinder of non - signatory parties to an arbitration agrement, the referal court wil be required to prima - facie rule on the existence of the arbitration agrement and whether the non - signatory is a veritable party to the arbitration. However, it further clarified that, due to the inherent complexity in determining whether the non - signatory is inded a veritable party, the referal court should leave this question for the arbitral tribunal to decide as it can delve into the factual and circumstantial evidence along with its legal aspects for deciding such an isue. The relevant observations read as under: — "163. […] Thus, when a non - signatory person or entity is arayed as a party at Section 8 or Section 1 stage, the referal court should prima facie determine the validity or existence of the arbitration agrement, as the case may be, and leave it for the arbitral tribunal to decide whether the non signatory is bound by the arbitration agrement.

¶164In case of joinder of non - signatory parties to an arbitration agrement, the folowing two scenarios wil prominently emerge : first, where a signatory party to an arbitration agrement seks joinder of a non - signatory party to the arbitration agrement; and second, where a non - signatory party itself seks invocation of an arbitration agrement. In both the scenarios, the referal court wil be required to prima facie rule on the existence of the arbitration agrement and whether the non - signatory is a veritable party to the arbitration agrement. In view of the complexity of such a determination, the referal court should leave it for the arbitral tribunal to decide whether the non signatory party is inded a party to the arbitration agrement on the basis of the factual evidence and

of

aplication of legal doctrine. The tribunal can delve into the factual, circumstantial, and legal aspects of the mater to decide whether its jurisdiction extends to the non - signatory party. In the proces, the tribunal should comply with the requirements of principles of natural justice such as giving oportunity to the non - signatory to raise objections with regard to the jurisdiction of the arbitral tribunal. This interpretation also gives true efect to the doctrine of competence - competence by leaving the isue of determination of true parties to an arbitration agrement to be decided by arbitral tribunal under Section

16."

(Emphasis suplied)

¶98Thus, even if it is asumed for a moment, that the question whether a non - signatory is a veritable party to the arbitration agrement is intrinsically connected with the is agrement, the referal courts should stil nevertheles, leave such questions for the determination of the arbitral tribunal to decide, as such an interpretation gives true efect to the doctrine of competence - competence enshrined under Section 16 of the Act, 196.

¶9This hands - of aproach of referal courts in relation to the question of whether a non - signatory is a veritable party to the arbitration agrement or not was reiterated in Cox and Kings (I), wherein one of us, (J.B. Pardiwala J.), observed that once an arbitral tribunal stands constituted, it becomes automaticaly open to al parties to raise any preliminary objections, including preliminary objections touching upon the jurisdiction of such tribunal, and to sek an early determination thereof. Consequently, the isue of impleadment of a non - signatory was deliberately left for the arbitral tribunal to decide, after taking into consideration the evidence aduced before it by the parties and the principles enunciated under Cox and Kings (I) (supra).

¶10Similarly, in Ajay Madhusudan (supra) it was held that since a detailed examination of numerous disputed questions of fact was required for determining whether the non - signatory is a veritable party to the arbitration agrement, the same canot be examined in the limited jurisdiction under Section 1 of the Act, 196 as it would tantamount to a mini trial. Acordingly, the arbitral tribunal was found to be the apropriate forum for deciding the said isue on the basis of the evidence that may be aduced by the parties.

¶101This aproach is necesitated by the inherent complexity involved in determining whether a non - signatory qualifies as a veritable party to the arbitration agrement, a determination that hinges upon a multiplicity of factual aspects and demands a high threshold of satisfaction based on a cumulative and holistic evaluation of the entire factual matrix. Such an intricate and evidence - driven exercise makes the arbitral tribunal the most

of

apropriate forum to adjudicate the mater, as it poseses the institutional advantage of conducting a comprehensive scrutiny of al evidences and materials aduced by the parties.

¶102Furthermore, the legislative intent underlying Section 1 of the Act, — particularly sub - section (6A) — is to ensure the expeditious disposal of aplications for the apointment of arbitrators. This legislative objective militates against referal courts undertaking any elaborate or detailed factual inquiry, which would inevitably delay procedings. Prudence thus dictates that the referal courts confine themselves to a prima - facie examination of the existence of the arbitration agrement and leave substantive determinations, such as the binding nature of non - signatories, to the arbitral tribunal. An aditional and equaly compeling consideration is that the power exercised by the referal courts under Section 1 of the Act, 196 is judicial in nature. Consequently, referal courts must refrain from embarking upon an intricate evidentiary inquiry or making final determinations on maters that are within the jurisdiction of the arbitral tribunal. Any premature adjudication or opinion by the referal court would not only usurp the tribunal's role as the forum of first instance for dispute resolution but could also cause iremediable prejudice. In particular, if the referal court were to refuse impleadment of a non - signatory, there would be no statutory right of apeal available to chalenge such a refusal. In contrast, determinations made by the arbitral tribunal — including on isues of jurisdiction and impleadment — are amenable to chalenge under Section 16 of the Act, 196 and, thereafter, under Section 37. Acordingly, the beter course of action is for referal courts to refrain altogether from delving, into the isue of whether a non - signatory is a veritable party to the arbitration agrement, and to leave such maters for the arbitral tribunal to decide in the first instance. "

¶10From the reading of the aforesaid judgments, it is luminously clear that there is a fine distinction between determining the 'existence' of an Arbitration Agreement and determining whether a non-signatory is bound by the Arbitration Agreement and the latter determination is to be left to the Arbitral Tribunal, once the referral Court examines and comes to a conclusion that there exists an Arbitration Agreement between the parties. The determination of 'existence of the Arbitration Agreement' is enough to refer the dispute to an Arbitral Tribunal even though its binding nature qua

the non-signatory may not be established at this stage. In fact, the Supreme

of

Court has held that 'existence of Arbitration Agreement' and 'veritable party to the Arbitration Agreement' are two separate and independent enquiries and the referral Court should not only refrain from entering into adjudicating the second question but rather loathe the exercise of this discretion, assuming for a moment, the referral Court in its jurisdiction under Section 11 of 1996 Act has the discretion to determine this question. The exercise of determining whether non-signatory is a party to the Arbitration Agreement involves a complex enquiry demanding a high threshold of satisfaction based on holistic evaluation of the factual matrix, evidence and contractual stipulations and relationships. Broadly understood, the Supreme Court has held that there is no umbilical cord between the exercise of determining the existence of the Arbitration Agreement and determining the existence qua a non-signatory party. The exercise of adjudicating the existence of an Arbitration Agreement qua a non-signatory party is, therefore, to be left to the Arbitral Tribunal.

¶11From a reading of the aforesaid judgments, it is clear as day that this Court cannot enter into the exercise of determining whether Respondents No. 2 to 4 as non-signatories are bound by the arbitration agreement in the Joint Venture Agreement executed between Petitioners and Respondent No.1. There is an arbitration clause in the Joint Venture Agreement, existence of which is not disputed by Respondent No. 1. Thus, there is no impediment in appointing the Arbitrator.

¶12Accordingly, these petitions are allowed, appointing Mr. Justice A.K. Chawla, former Judge of this Court (Mobile No.9910384636) as the Sole Arbitrator to adjudicate the disputes between the parties. Fee of the Arbitrator shall be fixed as per Fourth Schedule of 1996 Act.

of

¶13Learned Arbitrator shall give disclosure under Section 12 of the 1996 Act before entering upon reference.

¶14It is made clear that this Court has not expressed any opinion on the merits of the cases and all rights and contentions of the respective parties are left open. Whether or not, Respondents No. 2 to 4 are bound by the arbitration agreement, being non-signatories, is an issue, which is left open to be raised by the said Respondents before the learned Arbitrator.

¶15Petitions are disposed of in the aforesaid terms.

JYOTI SINGH, J

AUGUST 12, 2025

S.Sharma

1 of * IN THE HIGH COURT OF DELHI AT NEW DELHI % Date of Decision: 12 th August, 2025 + ARB.P. 491/2025 SAROJ & ORS. .....Petitioners Through: Mr. Arjun Sawhney, Mr. Vibhor Kapur, Mr. Rohan Bhambri and Mr. Arnav Gosain, Advocates. versus AXIS E CORP SOLUTIONS PVT LTD & ORS. .....Respondents Through: Mr. Kuldeep Kasana, Advocate. + ARB.P. 505/2025 MOHAMMAD AMIR .....Petitioner Through: Mr. Arjun Sawhney, Mr. Vibhor Kapur, Mr. Rohan Bhambri and Mr. Arnav Gosain, Advocates. versus AXIS E CORP SOLUTIONS PVT LTD & ORS. .....Respondents Through: Mr. Kuldeep Kasana, Advocate. CORAM: HON'BLE MS. JUSTICE JYOTI SINGH